Investors Sue over Worthless Stock Options

February 24, 2005 (PLANSPONSOR.com) - A lawsuit has
been filed against Countrywide Financial Corp. over
allegations that the company diluted the value of investor
stock options related to a 2001 bank acquisition.

Filed in a Manhattan federal court, the suit names
Calabasas, California-based, Countrywide and its
majority-owned Effinity Financial unit, according to
Reuters. The investors who sued are seeking to revalue the
stock options and restore their stake.

Effinity acquired Treasury Bank for $3.2 million in
cash, plus 700,000 options to buy Effinity shares.
Investors claim that the options gave them an 11% equity
stake in Effinity but were instead rendered worthless. To
do so, the suit contends that the companies named in the
suit undertook a series of moves that rendered the options
worthless without informing investors.

The group of plaintiffs includes investors and
employees, as well as a law firm pension fund, according to
Reuters.

“Effinity and Countrywide did not disclose their intent
to dilute and impair the options by issuing to Countrywide
… additional Effinity stock while publicly stating that
Countrywide was making contributions to capital as required
by the Federal Reserve Bank,” the complaint said, according
to Reuters.